Oil Price Fall: Global Economy Gain, Nigeria’s Pain

With the oil price fall from mid June 2014, Saudi Arabia maintains a $700 billion reserve fund! Painfully, Nigeria maintains a paltry “$3.1 billion” in its Excess Crude Account as confirmed by the Federation Accounts Allocation Committee (FAAC) in November 2014; a vast difference from the over $40 billion maintained between 2007 and 2009. However the red alert, we are experiencing a red economy no doubt; the trend in fall in the nation’s currency and overall economy since the review or rebasing of its GDP to an all-time high of $509.9 billion (N80.2 trillion) had not yielded the much promises about improved welfare of the citizens and improved well-being of the economy.

As a developing nation, there are more positive macroeconomic parameters that should be sightseen instead of rebasing the GDP on figures without regards to the real economic circumstances affecting the country. My elementary economics made it clear that economic growth is achieved by installing growth drivers: significant employment opportunities, infrastructural development, diversification of country’s foreign earnings, stable and assured security and eradication of corruption and corrupt persons from the stream of economic activities. Countries that are abreast of this simple elementary economics theory had laid their grounds since May 2009 when there was a similar fall in oil price that saw a robust economic growth for some developing nations.

Although not all oil producing nations may relish the blessings that come with weak demand by many consumer countries due to dull economic growth, or the surging US production in its shale oil and gas industry. Nigeria may be better-off than Venezuela, one of the world’s largest exporters with inflation running at about 60% on an economy staggering on a brink of recession if its accounts in its reserve funds are true picture of the figures it displays. At Nigeria’s present fuel price of N97 per litre (or the politically reduced price of N87 per litre), the country still stand a better position in a $6 million savings on subsidy, together with a best option of buying oil at lesser price for its internal consumption while planning suitable alternative to scrap oil.

As experienced in the mid to late 80s, Malaysia, a fellow developing nation, identified futuristic suitable alternatives to oil price fall with diligent focus on  manufacturing, automobile, upstream, downstream, insurance, and importantly, the power industry that saw a rapid transformation of the Asian baby into a giant in the region. From a country diving into recession with inflation biting up 41% and a Current Account Balance of US$-0.285 Billion, a judicious utilization of savings from oil subsidy laid the step into intense infrastructural development projection spanning 25 years. Moreover, the government consideration of an open Public-Private Partnership saw the government playing a significant supervisory role that paved way for private investment and structural advancement in the development of more than 70% of its key economic industries.

What are my projections? The Power industry require a robust drive; a dire need of funding to meet and increase output of power from the purchased generating companies; though the Telecomm sector is in its mature level, lease renewal is paramount to stabilize the diminishing return on service delivery. The Manufacturing sector seemed to be suffering more effects of the corrupted economy; in reality, the sector requires efficiency to curtail alternative import products together with the needed infrastructure to drive enhancement. The Banking and finance sector is  increasing in buffers, managing better offshore balances however, advances to oil sector needed to be made at a longer period in anticipation of oil recovery.

These permutations may appear a mere daydream if Nigeria continues to argue and deny the true state of the economy (as characterised by its economic actors) rather than identifying and implementing realistic policies that will drive the country back on the race course. But then the true colour of the economic status shall surface after the elections which will see a new government identifying new macro-economic policies to curtail challenges through a stable monetary policies and rigid adjustment to fiscal policies that will unleash dynamic economic equilibrium.

Salim Salihu Muhammed

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